Sander Levin

Sander Levin, Michigan, 9th District, Statements on TPP

The Trans-Pacific Partnership is a significant trade agreement involving 40 percent of the world's GDP. It represents the first time the United States has negotiated a comprehensive trade agreement with a huge industrial economy, Japan, and a Communist nation, Vietnam. It provides an opportunity to establish the rules for trade in this critically important region.

My main concern is how TPP might impact jobs and the livelihood of American workers. We have lost millions of good jobs as other nations have competed against us unfairly.

Because of this there has been an intensifying battle over trade policy; about whether there was a need to actively shape its terms, or whether the impact of expanded trade automatically would be positive, reflecting the basic doctrine of comparative advantage going back to the 19th century – one nation's economic operations complemented the other's, so each nation wins.

In 2007, when House Democrats took the Majority, we set a new course for U.S. trade policy. That new policy recognized that as we expand international trade we must raise international standards, not engage in a race to the bottom. We developed what became known as the May 10th Agreement. For the first time, strong and fully-enforceable labor and environmental standards were incorporated into our trade agreements on equal footing with every other commercial provision. And we recognized the need to make clear that our trade agreements are not intended to grant foreign investors greater substantive rights under U.S. law than U.S. investors have. We also worked to find an appropriate balance between protection of intellectual property rights and access to affordable medicines, particularly in developing nations.

A year ago, I spelled out what I urged was necessary for TPP to build on the May 10th framework and in no case to erode it. TPP as negotiated falls short of an acceptable outcome, and I cannot support it.

There are four key areas, worker rights, rules of origin, currency manipulation, and investment, where the results are wholly inadequate. There are other issues where I urged our negotiators to reach a stronger conclusion than they did in the final agreement, including access to medicines, environmental standards, and state-owned enterprises.

Worker Rights: Vietnam, Malaysia, and Mexico engage in abhorrent abuses of fundamental worker rights – competing internationally in a race to the bottom that harms workers everywhere. Yet, TPP is missing a key component of May 10th with respect to worker rights: mechanisms to ensure the full implementation and enforcement of the labor commitments, with Congress fully involved.

At the time the May 10th Agreement was established in 2007, there was very little confidence that the new labor obligations would be fully implemented and enforced. After Congress votes to approve an agreement, it loses considerable leverage to ensure implementation. That is why, in moving forward with the May 10th worker rights provisions in trade agreements, we insisted that the specified changes be made before Congress voted.

But unlike under the May 10th framework, Vietnam, Malaysia, and Mexico, three TPP countries that fall woefully short of international labor standards are not required to change their laws and practices to comply with the labor obligations before Congress votes on the Agreement, even though serious concerns remain today about the implementation and enforcement of the labor obligations in our trade agreements.

There are plans called “consistency plans” for Vietnam and Malaysia which contain specific provisions for implementing the worker rights obligation in TPP. This is a positive development. But there is no demonstrable evidence that either country is moving in the right direction on worker rights. Indeed, Vietnam and Malaysia seem to be moving in the wrong direction. For example, a woman our congressional delegation met in Vietnam a year ago who told her story of being in jail four years for helping workers organize has recently again been detained, beaten, and prevented from leaving her home for trying to exercise the same rights Vietnam is required to fulfill under the TPP. So there is ample reason to doubt the TPP labor obligations will be fully implemented before the agreement enters into force or after, for that matter.

And in the case of Malaysia, the need to ensure implementation and enforcement was exemplified by the action taken by the State Department to move Malaysia from Tier 3 to Tier 2 on the Trafficking in Persons Report last July. There was no basis for doing so, and it cost the Administration credibility more broadly as to its effective implementation of the provisions in TPP. And, particularly given the pervasive problem of corruption in Malaysia, there is reason to doubt that Malaysia’s human trafficking laws will be adequately enforced as a result of the provisions in TPP.

For Mexico, there isn’t even a consistency plan – indeed there’s no plan at all with commitments in writing as to changes to be made. Thus, there is no requirement that any actions ever be taken – before or after Congress votes – to bring Mexico into compliance with its labor obligations.

The United States has suffered devastating losses of high-paying industrial jobs to Mexico. Global automakers are planning to or have already invested a record $25.5 billion in Mexico between 2013 and 2016. The vast majority of the cars and trucks built in Mexican plants are exported, most sold in the United States. The shift to Mexico has affected manufacturing far beyond the automotive sector. Just last week, two Indiana plants making products for heating, ventilating, and air conditioning announced that they are moving operations to Mexico, costing over 2,000 Americans their jobs.

One reason for this dramatic shift south to Mexico is the huge gap in wages between American and Mexican workers. In recent years, real compensation in the Mexican auto sector slid by 13 percent while productivity rose by seven percent. The average compensation – wages and benefits – for a Mexican autoworker has been about $8 an hour, and an auto parts worker can make as little as $40 a week. The recent decline in the value of the Mexican peso widens the wage disparity even more.

This gap has been sustained because the vast majority of Mexican workers in manufacturing and other industries are deprived of their fundamental rights. For generations, the system has been rigged against real unions and real contracts, carried out through a corrupt institution that is biased in favor of the status quo and against the rights of workers. Not only is this harmful and unfair to Mexican workers, it is harmful and unfair to workers here in the U.S.

Some will say the loss of these jobs to Mexico is inevitable. I disagree. Given the importance of the automotive and manufacturing sector to our national economy, to our research, development and innovation, to good-paying middle class jobs across our country, we can and should be using every tool to promote domestic manufacturing. That is why the combination as to Mexico of a lack of enforceable action on worker rights and a weak rule of origin is a fatal flaw in the TPP.

Rules of Origin: The rules of origin define the content that is required to come from TPP countries in an auto or auto part in order for the final items to receive preferential treatment (i.e., lower tariffs) when they are sold in other TPP countries. The risk to auto suppliers, steel producers, and other manufacturers throughout our country is just too high under the negotiated text, which significantly lowers the content requirements under NAFTA. We should not be opening the TPP door to inputs from China, Thailand and other low wage countries – whether they flow through production in the U.S. or more likely in Mexico, where they will further drive down the cost of production and encourage the loss of additional U.S. jobs. In other words, U.S. consumers could find themselves driving TPP cars or trucks with over half of their parts by value made in China or elsewhere and the vehicle itself assembled in Mexico. This model comes with job loss as standard equipment.

Currency Manipulation: TPP was the opportunity, at long last, to address currency manipulation, after undertaken massively by Japan in the 1980s, 1990s, and early 2000s, and more recently by China. Up to five million jobs have been lost over the past decade because of currency manipulation. Even when people were able to find new jobs, they were at lower wages, with a long-lasting effect on family incomes and on communities.

The standards set by the IMF – to define and address currency manipulation – are clear, and ways to make them real were within our grasp if our negotiators had only sought to act on them. Instead, the result in TPP is basically more of the highly unacceptable same. The TPP finance ministers adopted an unenforceable side “declaration” that will in not address, in any meaningful way, this long-standing critical trade issue. That is simply not good enough.

Investment: USTR did negotiate some changes to investment, but failed to reform the chapter in important ways. Instead, they fell back on the argument that the U.S. has so far not lost a case. But the filing of a $15 billion ISDS case last month over the Keystone Pipeline to use arbitration instead of the American legal system once again demonstrated the risks to environmental and health regulations by our nation and our local governments.

The tobacco carve-out is a real step forward. It should not be weakened. It highlights the deep concern that revolves around the risks in the ISDS chapter – risks that are not unique to tobacco control measures.

Over the next months, the International Trade Commission (ITC) will complete a review of the economic impact of TPP. In written testimony, I have urged the ITC to conduct a much more comprehensive review than is often undertaken by other economic reports. Too often, claims about the positive economic impact of TPP rely more on rhetoric or stale economic theories than on solid economic studies. A recent widely-quoted study shows only very modest GDP growth over a long period of time – far less for the U.S. (only four tenths of one percent over 15 years) than for Vietnam and Malaysia. Even that finding is open to serious question because it assumes full employment and wages tracking with productivity in growth, none of which has been true. A report by the White House Council of Economic Advisers failed to look at the impact of imports, focusing instead on the benefits of increased exports. There has also been a failure in these analyses to look at the potential impact on growing income inequality. There has been a lack in these analyses of a breakdown of the impact on each of a number of specific sectors. I hope the ITC will utilize a new model that fully reflects the realities of international trade today so that we can spark a constructive debate about the issues most at stake - jobs and wages for American families.

Some will say that TPP is an improvement over the status quo. Others will say that we should not let the perfect be the enemy of the good. Regardless of whether these often rhetorical measuring sticks were relevant in the past when trade agreements simply equaled tariff reductions, they vitally miss the mark today. Trade touches all aspects of our lives, and we are setting an economic framework for generations. We cannot afford to lock-in weak standards, uncompetitive practices, and a system that does not broadly spread the benefits of trade, affecting the paychecks of American families.

To not get it right is to get it wrong. And this TPP as negotiated is not right for America.

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